Startup Law 101: 5 Mistakes That Can Blow Up Your Startup – Don’t Sign the “totally fine” ChatGPT Contract

Startups move fast, but legal mistakes move faster—and they hit harder. Whether you’re bootstrapping or backed by big VC, your lawyer isn’t just a formality—they’re your firewall. Too many founders treat legal like an afterthought, then wonder why things explode. From boardroom to courtroom, these are five founder mistakes that separate the bold from the bankrupt. So, before you launch that app, hire that friend, or sign that “totally fine” ChatGPT contract, read this:

1. Don’t Wait Until You’re in “Oh Sh*t” Mode to Call Your Lawyer

In the startup world, things move fast—your legal strategy should move faster. Waiting to bring in counsel until there’s a co-founder fallout, a misfired contract, or a surprise lawsuit is like trying to install brakes after your Tesla hits 90 mph. We’ve seen it all: 

• One founder stops showing up but still owns half the company because no one drafted a real agreement. 
• Someone grabs a one-page operating agreement off Google that leaves you stuck with default state rules that don’t fit your company’s needs. 

A little legal foresight upfront saves hours of cleanup later.

2. ChatGPT ≠ General Counsel

We love tech. We are tech. But let’s be clear: ChatGPT isn’t your lawyer. Sure, it’s a great tool to brainstorm ideas or understand the basics—but when it comes to actual legal advice, drafting contracts, or filing with the court, an understanding of the basics is not enough. We’ve seen AI-generated pleadings submitted by pro se litigants with non-existent case law that left judges visibly unimpressed. Or “independent contractor” agreements that read like W-2 onboarding packets. These kinds of missteps lead to lawsuits, IRS audits, and credibility issues that nobody wants. AI can help inform your next move, but you and your lawyer should be the ones to make it.

3. Ghosting Your Lawyer Is Not a Strategy

Lawyers aren’t mind readers. If you’re not giving them the full story—whether it’s the sketchy backchannel agreement with a vendor, the messy breakup with a co-founder, or the fact that your startup can’t deliver on a key term in your contract—they can’t help you. Think of your lawyer like a trusted product manager: they need the data, the bugs, the roadmap, and the pressure points. Keeping them in the loop means better outcomes, stronger protections, and fewer late-night emergencies.

4. Don’t Ask Your Lawyer to Be the Villain in Your Revenge Plot

Your lawyer is your advisor, not your hitman. Don’t ask them to send retaliatory letters to people who pissed you off, or to draft contracts you know you can’t honor just to “lock someone in.” And definitely don’t go shopping for a more “flexible” lawyer just because yours has ethical standards. In the startup world, reputations travel fast—and so do lawsuits. Let me say that again — reputations travel fast and so do LAWSUITS. The cost of doing something shady might not hit right away, but it always hits. The best lawyers help you scale smart, not shady.

5. Everyone Wants a Slice—Protect the Table

As soon as your startup starts gaining traction, people come out of the woodwork: sketchy “investors,” overpriced consultants, or friends of friends offering to “do your books” (read: barely passable spreadsheets). One wrong hire or premature partnership can blow up your cap table, tank your budget, or create legal issues you never wanted to see coming. We’ve seen founders contract for irrelevant services just to look legit—or loop in legit people at the wrong time, leading to misalignment and conflict. Be selective. You don’t need hype. You need people who get the mission and know when to show up. That also goes for lawyers, too. The right attorney is good for advising you on your next steps and knowing when to be selective with their own services. 

Final Thought: Choose Your Legal Team Like You Choose Your CTO

At the end of the day, the best lawyer for your startup is someone you can trust, communicate with, and count on to help you make smart, strategic decisions—not just clean up the mess afterward. Don’t wait until a dispute erupts, a deal falls through, or your cap table is a disaster before getting legal help. Bringing in a lawyer early can save you time, money, and stress by helping you avoid common traps—like vague governing documents, misclassified workers, or investor relationships that go sideways. And while it might be tempting to push for aggressive tactics or find a lawyer who’ll do what others won’t, shortcuts and shady moves almost always backfire. Every decision you make—from who you work with to how you handle conflict—shapes the future of your company. So, choose wisely. A good startup lawyer won’t just check legal boxes—they’ll help you build a foundation that lasts. Don’t be afraid to engage counsel sooner rather than later—it’s one of the smartest investments you can make.